The influence of grid connectivity, electricity pricing, policy-driven power incentives, and carbon emissions on renewable energy adoption: Exploring key factors

In the modern era, surging economic activities heighten energy demand, depleting traditional reserves and harming the environment. Renewable energy emerges as a vital alternative but faces technical, economic, and policy challenges. This study explores the impact of factors like energy grid, government incentives, CO2 emissions, economic growth, and electricity prices on renewable energy adoption in Pakistan from 1990Q1 to 2022Q4. Results reveal a U-shaped relationship between the energy grid and renewable energy penetration in the short and long terms. National support initially boosts green energy but diminishes over time. Economic incentives initially hinder adoption (i.e., 7.445, p < 0.000) but increase in the long run (i.e., −2.881, p < 0.000). Energy prices suppress adoption in the short term (i.e., −0.084, p < 0.050). Income correlates positively in the short term (i.e., 0.006, p < 0.000) but negatively in the long term (i.e., 0.019, p < 0.000). Policy-induced incentives and energy prices drive adoption, with impacts on income observed. Causal relationships and variance decomposition analysis highlight key factors influencing renewable energy integration in Pakistan, thereby informing policy and strategic decisions to foster sustainable energy practices.